With the advent of the Affordable Care Act (PPACA) came the need for employers to determine whether they are a small or large group. Definitions vary by state and failure to know could have significant financial consequence, especially for large employers who 1) don't offer health insurance to their employees, 2) offer health insurance failing to meet Minimum Essential Coverage standards, 3) offer insurance that isn't a "Qualified" Minimum Value Plan, 4) offer health insurance that fails to meet affordability standards. Benefit Team can help you wade through these compliance matters. The balance of this post will simply present an example to help you learn how to calculate if you are a small or large employer.
An example of how to determine whether a company is a small group for the purpose of purchasing group coverage is provided below. The methodology considers both full-time employees and full-time-equivalent employees.
Company Y has 40 full-time employees for each calendar month during 2015.
Company Y also has 20 part-time employees for each calendar month during 2015, each of whom has 60 hours of service per month.
Now, combine the hours of service of the part-time employees for a month: [20 x 60 = 1,200].
Dividing the combined hours of service of the part-time employees by 120* equals 10 [1,200/120 = 10]. This number, 10, represents the number of Company Y's full-time equivalent employees for each month during 2015.
Company Y adds up the total number of full-time employees for each calendar month of 2015, which is 480 [40 x 12 = 480].
Company Y adds up the total number of full-time equivalent employees for each calendar month of 2015, which is 120 [10 x 12 = 120].
Company Y adds those two numbers together and divides the total by 12, which equals 50 [(480 + 120 = 600)/12 = 50].
In this example company Y meets the size criteria for a small group because the total number of full-time and full-time equivalent employees for at least 50 percent of the preceding calendar year equals 50. Groups must consider additional IRS rules in making their final determination of whether the group is large or small, and some exceptions may apply.
A friendly voice awaits you at Benefit Team to help you with your questions and compliance needs.